Foundation Financial, Inc. (FFI) was incorporated in SC in November 2000. Soon afterward it became a Registered Investment Advisor (RIA) and provided financial advisory services through a platform, an early version of a turnkey asset management program (TAMP).
In early 2004, FFI began to manage several accounts. In late 2004, FFI hired American Values as a sub-adviser using its American Hero model portfolios. Miller, President of FFI, was and continues to be Chief Investment Counsel of American Values.
In the second quarter of 2005, an institution asked Miller to create and manage a style-focused, biblically based portfolio. Miller proposed a mid-cap style for good long-term return and a focus on family values investing. Both he and the institution wanted to enable Christians to align their investments with the values of the traditional family and to earn a good return. Extensive values and investment research was done to create diversified, asset-allocated portfolios of securities of companies that reflected these family values.
In November 2005, two Foundation Financial asset-allocation model accounts (Growth and Moderate Growth) were created and invested for this institution. Both portfolios had positive characteristics based on modern portfolio theory, such as high alphas and high Sharpe ratios.
In 2005 and 2006, FFI focused on learning how to best serve believers in America. Research on values-driven investing and effective client service included:
- Custodians— contacted and / or read material from Schwab, TD Ameritrade, and Fidelity (the three leading Custodians for RIAs) to learn about asset-based and transaction-based pricing and many other custodial services
- TAMPs & Technology — met BridgePortfolio and several TAMP representatives at conferences; Turnkey Asset Management Programs (TAMPs) provide one-stop access to services needed by advisers, ranging from good asset managers to effective practice management assistance; TAMPs continue to grow very rapidly
- Clients / Prospects — met Christian investment advisors, Christian retail investors, and representatives of Christian institutions
- Investment Vehicles — researched operation and financial characteristics of mutual funds, separately managed accounts, 401k products, hedge funds, and Regulation D Offerings
- Other — researched values analysis of companies, investment management, performance verification, strategic alliances, performance attribution software and compliance
This website reflects the implementation of this research and a terminology shift from family values investing to Biblically Responsible Investing. Our faith-based screening and investment management is unchanged. As a member of Kingdom Advisors, we emphasize our commitment to a God-centered approach to investing.
The MPT (modern portfolio theory) statistics of the portfolio continue to be good: (1) the alphas are high (over 15), which is 2-3 times the level of many portfolios, implying good stock selection; (2) the betas and standard deviations are near or below the benchmark, implying short-term volatility in line with or below market volatility; (3) and the Sharpe ratios are substantially above the benchmark, implying good potential for favorable risk-adjusted return.
These MPT statistics imply that FFI’s mid cap portfolio has good potential to exceed the performance of its benchmark. The benchmark is a market cap weighted index; the dominant component is mid cap, the S&P 400.
Some research shows that early alpha generators often have above average performance in their initial years. Our recent start-up and high alphas seem to place Foundation Financial in the early alpha generator category.